Family Finances: Q & A with Finance Consultant Anne Y. Chambers
Last month, Mums ‘n Chums asked its’ members what their biggest financial concerns were for their families. We received lots of great feedback, and turned the questions over to professional Finance Consultant Anne Y. Chambers.
Anne, an expert on women and wealth, was kind enough to provide the following answers (and important advice) to our members’ top concerns:
Member Question #1. “Can you recommend the best way to create a budget plan, for things like groceries and other monthly expenses?”
Anne’s Answer: “Budgets should be reviewed on a monthly basis. If you are consistently overspending a good thing to do is to keep spending charts and then you will be able to see where your money is really going.
The best way to create a budget plan is to follow the mock budget seen below.” (the numbers for groceries are very approximate and will vary family to family. Delete these numbers and replace them with your own) :
| General Budget | |||
| Date | Description | Incomings | Outgoings |
| 30th | Payday | $4,400.00 | 0 |
| 30th | Tithe | 0 | $440.00 |
| 30th | Mortgage | 0 | $1,200.00 |
| 30th | Living | 0 | $1,400.00 |
| 2nd | RRSP | 0 | $100.00 |
| 2nd | Savings | 0 | $50.00 |
| 6th | Gas | 0 | $150.00 |
| 10th | Life Ins | 0 | $74.67 |
| 11th | Home Phone | 0 | $55.00 |
| 15th | Hydro | 0 | $175.00 |
| 15th | Cable | 0 | $57.00 |
| 17th | Security | 0 | $33.11 |
| 17th | World Vision | 0 | $35.00 |
| 17th | Cell | 0 | $110.00 |
| 20th | House Insurance | 0 | $70.00 |
| 20th | Internet | 0 | $50.00 |
| 27th | Car Payment | 0 | $300.00 |
| 30th | Car insurance | 0 | $100.00 |
| Sub-total | —-> | $4,400.00 | $4,399.78 |
| Balance | —-> | 0 | $0.22 |
The spending chart will also help you to see what your actual expenses are in a month, and therefore you can build an accurate budget based on those expenses.
Member Question #2. “Can you help us better understand RESP’s? Where should we buy them, what are the benefits, what are the pros and cons, what options are available, what if my child ends up not going to school, and how much should I budget for?
Anne’s Answer: “Lots of great questions about RESP’s! I’m going to answer these in point form:
- When we are thinking about RESP’s I think it is best to think diversification. What I mean by this is not putting all our eggs in one
basket. Money can be invested independently, or in an RESP or in an “In
Trust” investment account.
- “In Trust” Investment accounts: the investments must be handled with care and monitored carefully by the parents. The child will have full access to the money at the age of 18. Investments and dividends are taxable. Capital gains can be accrued in the child’s name.
- Another investment option is a Juvenile Participating Whole Life Policy.
Funds can grow inside the cash value account tax sheltered and there is no
penalty if they are not used for education. The parent has full control
over the money. The child’s life is also then insured for life.
RESP’s: Start ASAP!
Pros:
- Government does not tax the returns or dividends inside the RESP.
- The Government will make contributions into the RESP. The first $2500.00 is the maximum contribution that the government will contribute a grant to the RESP.
- When the child withdraws the money to pay for university or college, the
child, not the parent, reports the money as income and therefore pays tax at a lower rate.
Cons:
- The money is taxed as income when withdrawn.
- There may be penalties if the money in the RESP is not used for education.
Some general RESP information you should know:
- Maximum amount can be rolled over to the parents RRSP if not used for
education.
- To start an RESP you must apply for a social insurance number for your
child.
- RESP accounts can be opened at the bank, or through another financial
institution such as an insurance and investment company, or through group plan dealers.
- What you have to watch for are the FEES! Ask if the RESP is Front End
loaded or Back End loaded.
- Now the parent must choose the investments. Go slowly and really understand what you are investing in!
- Some RESP providers require minimum deposits or regular contributions and charge service fees.
- Self directed RESP’s are a good idea: the parent then decides on the
investments. Parents have more control.
- RESP’s can be opened for one child or more in the same account.
- Group plans: parent’s savings are combined and invested by the dealer.
There are fees for these plans.
- The maximum that can be contributed to an RESP is $50,000.00.”
Member Question #3. “I’m looking for ways to teach my kids about money- allowances, child bank accounts, budgeting…at what age should I start?
Anne’s Answer: “This month I did a conference call on How to Talk to Your Kids about Money, which explains all of these concerns in depth. Click here to listen in on a recording of the call.”
Kind regards,
Anne
Anne Y. Chambers is a Finance Consultant and Expert on Women & Wealth for Charis Financial in Orangeville, Ontario. She can be reached via the website or by phone at (519) 940-2650.
Posted by: Sara Hodge on: 2010-05-03 Permanent Link: Family Finances: Q & A with Finance Consultant Anne Y. Chambers
